Top 10 investment
1. Unlicensed individuals, such
as life insurance agents, selling securities. To verify that
a person is licensed or registered to sell securities, call your
state securities regulator. If the person is not registered, don't
2. Affinity group fraud.
Many scammers use their victim's religious or ethnic identity to
gain their trust -- knowing it's human nature to trust people who
are like you -- and then steal their life savings. The fraud varies
from "gifting" programs at some churches to foreign exchange
scams targeted at Asian Americans.
3. Payphone and ATM sales.
In early March, 25 states announced actions against companies and
individuals -- many of them independent life insurance agents --
that took roughly 4,500 people for $76 million selling coin-operated
customer-owned telephones. Investors leased payphones for between
$5,000 and $7,000 and were promised returns of up to 15 percent.
4. Promissory notes.
Short-term debt instruments issued by little-known or sometimes
non-existent companies that promise high returns -- upwards of 15
percent monthly -- with little or no risk.
5. Internet fraud. Scammers
use the Internet to "pump and dump" thinly traded stocks,
peddle bogus offshore "prime bank" investments and publicize
pyramid schemes. Ignore anonymous financial advice on the Internet
and in chat rooms.
6. Ponzi/pyramid schemes.
These swindles promise high returns to investors, but the only people
who consistently make money are the promoters who set them in motion,
using money from previous investors to pay the new investors. Inevitably,
the schemes collapse.
CDs. These higher-yielding certificates of deposit won't
mature for 10 to 20 years, unless the bank, not the investor, "calls,"
or redeems them. Redeeming the CD early may result in large losses
-- upwards of 25 percent of the original investment. Regulators
say sellers of callable CDs often don't adequately disclose the
risks and restrictions.
settlements. Originated as a way to help the gravely ill
pay their bills, these interests in the death benefits of terminally
ill patients are always risky and sometimes fraudulent. The insured
gets a percentage of the death benefit in cash from the investor;
investors get a share of the death benefit when the insured dies.
Because of uncertainties predicting when someone will die, these
investments are extremely speculative. In a new twist, Pennsylvania
regulators say "senior settlements" -- interests in the
death benefits of healthy older people -- are now being offered
bank schemes. Scammers promise investors triple-digit returns
through access to the investment portfolios of the world's elite
banks. These schemes often target conspiracy theorists, promising
access to the "secret" investments used by the Rothschilds
or Saudi royalty.
seminars. Often the only people getting rich are those running
the seminar, making money from admission fees and the sale of books
and audiotapes. These seminars are marketed through newspaper, radio
and TV ads and "infomercials" on cable television. Regulators
urge investors to be extremely skeptical about any get-rich-quick
North American Securities Administrators Association
-- Posted: June 4, 2001